Top 5 Mutual Funds for Indian Investors to Access American Markets

November 13, 2024 By: Shalini Bhardwaj

With global diversification gaining popularity, many Indian investors are looking to invest in American stock markets. Investing in U.S.-based assets provides access to some of the world’s biggest brands, high-growth sectors, and market stability. For those interested in broadening their investment portfolio, several mutual funds offer exposure to American stocks while allowing investments through systematic investment plans (SIPs) and lump-sum payments.

Here’s a look at five mutual funds that Indian investors can consider to tap into the American market potential.

1. Motilal Oswal Nasdaq 100 Fund of Funds Direct Plan

Overview: The Motilal Oswal Nasdaq 100 Fund of Funds Direct Plan offers exposure to the Nasdaq 100 index, home to leading tech giants like Apple, Google, and Amazon. This fund is well-suited for those looking for high-growth opportunities in the U.S. technology sector.

• Returns: The fund has shown solid performance, with a 13.99% annual return over the last three years and 24.63% over five years.
• NAV: Rs 37.2557
• AUM: Rs 5,138 crore
• Expense Ratio: This fund has one of the lowest expense ratios in its category.
• Investment Mode: Investors can invest via SIPs starting from Rs 500. Notably, only SIP investments are allowed, making it ideal for consistent, long-term investing.

2. Motilal Oswal S&P 500 Index Fund

Overview: Another offering from Motilal Oswal, the S&P 500 Index Fund, focuses on the broader U.S. market. Tracking the S&P 500 index, this fund gives investors access to a diversified range of sectors in the U.S. economy, including finance, health care, and consumer goods.

• Returns: The fund has delivered an annual return of 13.95% over the past three years.
• NAV: Rs 23.1995
• AUM: Rs 3,543 crore
• Launch Date: April 28, 2020
• Investment Mode: Only SIP investments are accepted, starting at Rs 500.

3. Franklin India Feeder – Franklin U.S. Opportunities Fund

Overview: This fund, from Franklin Templeton, is designed for investors looking for diversified exposure in the U.S. stock market. It invests across sectors, offering stability and consistent returns through long-term growth in the American economy.

• Returns: This fund has generated returns of 5.69% over three years, 17.65% over five years, and an impressive 14.89% over ten years.
• NAV: Rs 74.04
• AUM: Rs 3,514 crore
• Investment Mode: Investors can choose to invest via SIPs or lump-sum payments, with a minimum starting amount of Rs 500.

4. SBI International Access – US Equity Fund of Funds Direct Plan

Overview: Managed by SBI Mutual Fund, this fund focuses on U.S.-based equities, allowing Indian investors to benefit from growth in international markets. Launched in March 2021, the fund provides access to the U.S. market, targeting a broad range of sectors.

• Returns: It has returned 13.15% annually over the past three years.
• NAV: Rs 17.51
• AUM: Rs 925 crore
• Investment Mode: Investment options include SIPs and lump-sum payments.

5. Edelweiss U.S. Technology Equity Fund of Funds – Growth

Overview: The Edelweiss U.S. Technology Equity Fund of Funds is a unique choice for those focused on the fast-paced growth of U.S. tech companies. This fund offers access to U.S.-based technology giants, a sector that consistently performs well and leads innovation globally.

• Returns: The fund has provided a three-year annual return of 6.63%.
• NAV: Rs 26.15
• Investment Mode: Investors can begin with either SIP or lump-sum payments.

Why Invest in U.S.-Focused Mutual Funds?

American markets are often seen as relatively stable, and they offer growth in some of the world’s largest and most innovative sectors. Here are a few reasons why investing in these funds could be beneficial:

1. Global Diversification: Investing in international markets can reduce risk in an Indian-only portfolio and provides stability if local markets experience downturns.
2. Exposure to Tech and Innovation: Many U.S.-focused funds, particularly those in the Nasdaq 100, give access to the top tech companies and high-growth sectors.
3. Potential for Higher Returns: While American markets have consistently delivered growth over the years, funds like Motilal Oswal Nasdaq 100 have shown especially strong historical returns, attracting global investors.
4. Hedge Against Currency Risks: Investments in U.S. markets can act as a hedge against currency depreciation. If the Indian Rupee weakens, returns on U.S. investments might increase when converted to INR.

Important Considerations Before Investing

While international funds offer potential benefits, they come with their own set of considerations. Keep these in mind when exploring U.S.-based funds:

• Expense Ratios: Look for funds with lower total expense ratios, as these can impact your long-term returns.
• Tax Implications: International mutual funds may be subject to different tax treatments than domestic funds. Be sure to consult with a financial advisor regarding tax obligations.
• Market Volatility: U.S. markets, like any other, are not immune to volatility. It’s advisable to invest with a long-term perspective to ride out market fluctuations.

These top five U.S.-focused mutual funds offer Indian investors an opportunity to diversify their portfolios and tap into the potential of the American stock market. By carefully selecting funds aligned with their financial goals, investors can make the most of global opportunities while maintaining a balanced investment approach.